Stocks Continue To March To The Beat Of Their Own Drum

Stock market futures continued to trade constructively despite weak economic data releases, renewed US-China trade frictions, Brexit talk gridlock, and concerns over the second wave of infections as lockdowns are eased.
 
But I think the market has been spooked as Europe enters the fray after TSMC shares have dropped around 3% on market rumors of halting Huawei orders.
 
But despite this hic-up, I think European investors will be encouraged to see that US and European stock futures advanced along with Asian equities today And that Crude oil surged to over $30 for the first time since March. Commodity currencies pushed higher as markets took encouragement from signs of business reopening across western economies.
 
The Yuan
 
USD/CNH initially traded lower on the back of higher equities but retraced to 7.1350 after the Nikkei reported that TSMC has stopped accepting new Huawei orders, which a Reuters report, citing TSMC, later refuted.
 
I don't expect the political/trade tensions between China and the US to de-escalate, and see better risk/reward in buying the dips, although USD/CNH may be capped into the NPC at the end of this week.
 
The two primary hedges for trade war risk are USD/CNH and Gold, and with short term gold positions, a bit crowded, traders, are buying USD/CNH.
 
Gold  Markets
 
After gold consolidates in the $ 1750-75 regions and if traders continue to shun  G-10 fiat currencies as a hedge for trade war risk in favor of gold. Money on the sidelines will find its way into gold as US-China friction should continue to lead prices higher through $ 1800 in the not too distant future.
 
Oil  Markets and FX
 
I wrote many things about oil over the last two weeks and why prices will go higher and hit WTI $ 40 by the end of June. With  OPEC sticking to May/June, cuts for H2-20 could translate into deficits in supply-demand given the seasonal relief June usual yields for US inventories as summer driving kicks into gear especially this year as we move out of the sudden stop scenario. In the WTI oil futures curve, contango is moving towards more 'normal' levels in acknowledgment of OPEC+ output cuts, suggesting that US storage concerns are ebbing.
 
The surge in oil prices will also provide a selective opportunity to sell the USD  against oil-sensitive G10 currencies, including NOK, CAD, and AUD, although, with trade war risk, I'm running hot cold on the Aussie right now.
 
Oil is not the only driver of these currencies, but a recovery in prices will help terms of trade, credit spreads, and budget concerns in the context of the petrodollar inflows to balance the budgets.